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Loans for People on Universal Credit

Living on Universal Credit can make it harder to deal with unexpected costs. Whether it is an urgent car repair, a broken boiler or an essential bill that needs paying, many people look at borrowing to help bridge the gap. If you are receiving Universal Credit, you may be wondering what options are available and whether getting approved for a loan is possible.

How much would you like to borrow?
Representative 79.5% Rates from 48.1% APR to 1721% APR. The minimum Loan Term is 3 months. The maximum Loan Term is 36 months. Representative Example: £1,000 borrowed for 18 months. Monthly Repayment of £89.22. The total amount repayable is £1605.96. Interest amounts to £570.44, an annual interest rate of 59.97% (fixed) Representative APR: 79.5% (variable). *Subject to lender approval. Cash within 60 minutes is possible, depending on whether your bank supports Faster Payments. Otherwise, funds may take 24–48 hours to arrive.

In this guide, we explain how loans for people on Universal Credit work, the options you may want to consider and the key things to think about before you apply.

Can You Get a Loan on Universal Credit?

Yes, it’s possible to get a loan while receiving Universal Credit. Some lenders are willing to work with people on benefits, as long as you can show that you can afford the repayments. Your Universal Credit payment can count as part of your income when assessing affordability.

However, borrowing options may be more limited. Mainstream banks might reject applications from those with lower or irregular incomes. That’s where specialist lenders — like those we work with at Dot Dot Loans — come in.

Budgeting Advances from the Government

Before considering private borrowing, check if you’re eligible for a Budgeting Advance through your Universal Credit account. This is an interest-free loan provided by the Department for Work and Pensions (DWP) to help with essential one-off expenses, such as:

  • Emergency household costs (like replacing a cooker)
  • Work-related costs (like buying equipment)
  • Funeral expenses

You’ll need to repay the advance through deductions from your future Universal Credit payments. The amount you can borrow depends on your circumstances but usually ranges from £100 to £812.

What About Personal Loans?

If a Budgeting Advance doesn’t cover your needs, a personal loan could be an alternative. Some lenders specialise in helping people with lower credit scores or incomes, including benefit claimants.

At Dot Dot Loans, we work with a panel of UK lenders who consider applications from people receiving benefits, including Universal Credit. All lenders we work with are FCA-authorised and follow responsible lending practices.

What Do Lenders Look At?

Each lender will have their own criteria, but typically, they will consider:

  • Your total monthly income (including benefits)
  • Your regular expenses and outgoings
  • Your credit history and any existing debts
  • Whether the repayments are affordable based on your situation

Some lenders will carry out a soft search at the eligibility stage, which does not affect your credit score. If you decide to move forward and make a full application, a hard credit check may then be carried out before a final decision is made.

Things to watch out for

When you are borrowing on a limited income, it is important to take a careful approach. Keeping a few key points in mind can help you make a more informed decision.

Affordability is one of the most important things to consider. Only borrow what you feel confident you can repay, as missed payments can lead to extra charges and may affect your credit file.

Interest rates can also be higher for loans aimed at people on benefits. Before you apply, always look at the total cost of the loan so you understand exactly what you would repay overall.

The length of the loan matters too. Spreading repayments over a longer period can reduce what you pay each month, but it can increase the total amount you repay in the long run.

It is also important to be alert to scams. Be cautious of any lender who asks for fees upfront or is not authorised by the Financial Conduct Authority. Checking a lender is regulated can give you greater peace of mind.

Alternatives to loans

If money is tight, there may be other ways to get support without borrowing. Some local councils offer welfare assistance or grants for people facing financial difficulties. Charities and advice services can also provide practical help and guidance on managing your money. Credit unions are another option, offering community based loans that are often more affordable and flexible for people on benefits.

Tips before you apply

Before you apply for any loan, it can help to check your credit report so you know what lenders may see. Using an eligibility checker that carries out a soft search can also be useful, as this lets you explore your options without affecting your credit score.

Taking time to compare different options is important. Look at the representative APR, the loan term, the size of the repayments and the total cost of borrowing. It is also wise to avoid making several applications close together, as this can have a negative impact on your credit file.

Final thoughts

Receiving Universal Credit does not automatically mean you cannot get a loan, but it does make it even more important to borrow carefully. If you are eligible for a Budgeting Advance, this is often a good place to start, as it can be a lower cost option. If that is not available, there are regulated lenders who may still be able to help, including those we work with.

At Dot Dot Loans, our aim is to keep the process clear and straightforward. We use soft search technology to help you find options that match your circumstances, with no hidden fees and no obligation to proceed.

If you are thinking about taking out a loan while receiving Universal Credit, spending a little time exploring your options can help you choose the path that feels right for your situation.